The Australian sharemarket is expected to open slightly lower on Monday as investors look ahead to key economic data and a busy week of central bank commentary for further direction on interest rates.
ASX futures were down 13 points, or 0.1%, indicating a softer start for the S&P/ASX 200 after Friday's strong rally, which marked the benchmark's biggest one-day gain in almost two months.
Investor sentiment remains tied to developments in the Middle East, with markets closely watching negotiations between the US and Iran over a proposed ceasefire extension and the reopening of the Strait of Hormuz. Reports over the weekend suggested US President Donald Trump is seeking stronger provisions in any agreement, particularly around Iran's enriched uranium stockpile.
ASX posts second straight monthly gain
The ASX 200 finished last week 74 points, or 0.86%, higher at 8,731, securing a second consecutive weekly and monthly advance.
The local market was supported by gains on Wall Street and softer-than-expected Australian inflation data, although concerns around weak consumer confidence, a cooling housing market and the lingering impact of higher interest rates continued to weigh on sentiment.
Consumer Discretionary stocks led sector performance, rising 4.38% for the week, followed by Materials (+3.34%), Real Estate (+2.57%) and Information Technology (+2.28%).
Energy was the weakest-performing sector, falling 3.28%, alongside declines in Telecommunications (-2.48%), Utilities (-1.56%) and Financials (-1.18%).
Among individual stocks, SiteMinder surged 25.9%, Coronado Global Resources gained 25.6%, Nufarm climbed 24.0% and Bapcor added 19.4%.
At the other end of the market, ASX Ltd fell 22.3%, IDP Education dropped 16.5%, Arafura Rare Earths lost 14.5% and Imugene declined 11.5%.
GDP figures in focus this week
Attention now turns to Wednesday's release of Australia's March quarter GDP figures.
The economy expanded 0.8% quarter-on-quarter in the December quarter, lifting annual growth to 2.6%, the strongest pace in nearly three years. Economists expect growth of 0.5% in the March quarter, which would leave annual growth unchanged.
Markets will closely examine household consumption, savings and per capita GDP data for signs of how Australian households are coping with elevated living costs and interest rates.
A weaker-than-expected result could reinforce expectations that the Reserve Bank of Australia has completed its tightening cycle, while stronger growth may keep the prospect of further policy tightening alive.
The week will also feature May house price data, the Melbourne Institute inflation gauge and testimony from RBA Governor Michele Bullock before a Senate committee on Thursday.
Interest rate markets currently price in just 2 basis points of tightening at the RBA's June meeting and around 20 basis points of additional hikes across the remainder of 2026.
Wall Street reaches fresh record highs
US markets finished Friday, the week and the month at record levels as investors welcomed easing geopolitical tensions and continued strength in technology stocks.
The Dow Jones Industrial Average rose 0.7%, while the S&P 500 and Nasdaq Composite each added 0.2%.
For May, the Nasdaq jumped 8.4%, extending April's strong gains, while the S&P 500 and Dow each advanced more than 2.8%.
Optimism surrounding artificial intelligence, resilient corporate earnings and hopes for a US-Iran ceasefire extension helped support risk appetite.
However, analysts noted that uncertainty remains. NAB head of FX strategy Ray Attrill said markets ended the week with elevated expectations for progress in Middle East negotiations but warned sentiment could become more defensive if no further developments emerge.
European markets mixed as defence stocks gain
European equities were mixed on Friday but finished May in positive territory as investors weighed prospects for a ceasefire agreement in the Middle East.
The pan-European FTSEurofirst 300 index edged 0.1% higher, while the UK's FTSE 100 slipped 0.2%.
Defence stocks outperformed after NATO reiterated its commitment to defend member states following reports that a Russian drone struck an apartment building in Romania during an attack on neighbouring Ukraine.
Airline stocks also benefited from lower oil prices, with Lufthansa and Air France both gaining more than 2%.
Currencies: Australian dollar eases after strong weekly gain
Currency markets were broadly firmer for the US dollar at the start of the week.
- The euro traded at US$1.1653.
- The Japanese yen weakened 0.2% to ¥159.36 per US dollar.
- The Australian dollar slipped to US71.69 cents after reaching US72 cents on Friday. Despite the pullback, the local currency gained 0.8% over the previous week amid optimism surrounding Middle East peace negotiations.
Commodities mixed as oil slides and gold rebounds
Oil prices recorded their steepest monthly decline since April as traders assessed the potential impact of a ceasefire agreement between the US, Israel and Iran.
Brent crude settled down 2.4% at US$92.05 a barrel, while US benchmark WTI crude finished May down almost 17%.
Despite hopes for an agreement, analysts noted that reopening shipping routes through the Strait of Hormuz would still require extensive mine-clearing operations, infrastructure repairs and production restarts.
Base metals were mixed, with copper futures easing 0.6% on profit-taking and aluminium gaining 0.2%.
Gold climbed 3.3% to US$4,593 an ounce as investors responded to reports of a ceasefire extension, while iron ore futures edged 0.2% lower to US$108.82 per tonne.
Looking ahead
Alongside Australia's GDP figures on Wednesday, investors will monitor May house price data and inflation indicators for further clues on the health of the domestic economy.
In the United States, attention turns to the Institute for Supply Management's manufacturing PMI for May, which will provide an updated reading on activity across the industrial sector.
Developments in the Middle East will also continue to be a key driver of market sentiment throughout the week.